NetFlix 2004 Annual Report Download - page 76

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NETFLIX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(in thousands, except share, per share and percentages)
4. Balance Sheet Components
Property and Equipment, Net
Property and equipment, net consisted of the following:
As of December 31,
2003 2004
Computerandotherequipment ....................... 3-5years $ 18,325 $ 23,938
Internal-use software ............................... 1-3years 7,868 10,094
Furnitureandfixtures .............................. 3years 1,040 1,193
Leasehold improvements .................... Overlife of lease 2,046 2,482
Capital work-in-progress .................................... 46 4,498
Property and equipment, gross ................................ 29,325 42,205
Less: accumulated depreciation ............................... (19,553) (23,477)
Property and equipment, net .................................. $ 9,772 $18,728
Capital work-in-progress consists primarily of approximately $4,268 million of a down payment for
leasehold improvements associated with the new corporate headquarters in Los Gatos, California. The facility is
under construction and expected to be completed in December 2005, at which time the leasehold improvements
will be completed and amortized over the shorter of the lease term or the estimated useful life of the related
assets.
Property and equipment included approximately $6,173 of assets under capital leases as of December 31,
2003 and 2004. Accumulated amortization under these leases totaled $5,901 and $6,156 as of December 31, 2003
and 2004, respectively. The related amortization is included in depreciation expense.
Internal-use software included approximately $4,910 and $6,301 of internally incurred capitalized software
development costs as of December 31, 2003 and 2004, respectively. Accumulated amortization of capitalized
software development costs totaled $4,174 and $5,408 as of December 31, 2003 and 2004, respectively.
Accrued Expenses
Accrued expenses consisted of the following:
As of December 31,
2003 2004
Accrued state sales and use tax ................................. $ 3,751 $ 4,736
Employee benefits ........................................... 3,695 2,709
Other ..................................................... 4,179 5,686
Total accrued expenses ....................................... $11,625 $13,131
5. Debt and Warrants
Note Payable
The Company had a note payable to Lighthouse Capital Partners II, L.P. with an unpaid balance of $1,667
as of December 31, 2001. The note payable was secured by substantially all of the Company’s assets and accrued
interest at 12 percent per annum. The note payable was fully paid off in August 2002.
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